Property leads UK economic growth

May 3, 2023

In recent years, the UK construction sector and property industry have faced some hurdles, but these sectors have proven to be resilient with new figures showing significant growth.

RIFT Tax Refunds looked at the number of VAT and/or PAYE-based enterprises by industry to see which sectors have experienced the strongest growth in the past year and across the last five years. This research shows how the construction sector and property industry match up to other industries.

For starters, the construction sector is currently the second largest industry in the UK with 374,980 active businesses. It’s also had a successful year, recording 4.2% growth to the end of 2022. The property industry saw the strongest one-year growth with 5.1% to hit a total of 110,715 enterprises.

When looking at industry performance on a longer-term scale, the construction and property industries made it in the top three sectors over the past five years. Boasting 17.2% growth, construction had the third-best performance, while the property industry’s growth of 18.8% placed it in second.

Bradley Post, managing director of RIFT Tax Refunds, commented: “Amidst significant economic uncertainty, it’s clear that two of our great industries are thriving more than most. Property and construction rank in the top three sectors for both one-year and five-year growth, and construction even sits in the top three for overall sector size.

"So it’s great to see that the UK’s property interests doing so well, but if that’s to continue in the long-term we need to ensure that construction in particular is given the space and resources to thrive. This is especially true when considering the housing shortage our country has been struggling to remedy for decades.”

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Increasing opportunities in housebuilding

Housebuilding has faced a number of challenges in the past few years. This includes the pandemic having brought some building sites to a temporary halt, which caused delays. Construction costs have also been on the rise, but despite this, there has been a strong recovery across the housebuilding sector.

The government previously had a target of building 300,000 homes a year to help ease the housing crisis. However, this has yet to be met and now the target is expected to be dropped. But there is still the need for an ever-increasing number of homes.

Within the construction and property industries, there is still so much room for growth. As there is a housing shortage across the UK housing market, there simply aren’t enough homes being built to satisfy ongoing demand, which is continuing to rise.

Over the past year, new homes have been a key part of property sector activity. There has been increasing demand for new-builds. In England, about 11,608 new homes were sold in 2022, and this accounted for 2.1% of total market property transactions.

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A long-term outlook in property

There had been some predictions at the end of 2022 of an imminent housing market crash. However, this has still not happened. House price growth may have slowed due to a correction, but the property market is gaining momentum once again.

When it comes to investing in the property industry, a long-term outlook is key. And the resilience of the property and construction sectors is due to the simple fact that there is a supply and demand imbalance.

While this is the case, we will likely continue to see upward pressure on house prices and rents across the UK property market. Demand for property in the private rented sector alone has grown every year since 2018 and surged by an impressive 57% over the past five years. And the sector is expected to further increase in size in the coming years, which could further boost buy-to-let returns.

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Property growth moving forward

When it comes to the future of house prices, many look to house price trends, both historic and predicted. There is also the natural cycle of the property market to take into account. Over the course of numerous years, prices are unlikely to only rise, or only fall, but will oscillate steadily upwards.

This is why the most successful property investors tend to be those who target long-term gains and focus on the bigger picture. Economic consultant Fred Harrison, who coined the theory surrounding the 18-year property cycle, is predicting house prices to rise until 2026.

According to this theory, house prices will always recover as the next cycle begins again. So, no matter where we are in the property cycle, there will be opportunities to be had as long as property investors focus on supply and demand across the housing market and projected returns within the rental sector.

If you want to talk to us about your next property investment opportunity, get in touch with our team at 01625 725 779, or email us at contact@theprestburyadvisory.com.

Property leads UK economic growth

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